What Does Iberdrola's $295 Million Grant Mean for U.S. Wind Power?

The Department of Energy gave a big boost to solar and wind projects across the United States yesterday when it handed out nearly $503 million to companies in an attempt to raise their prospects of receiving outside capital. The luckiest recipient is Iberdrola, a Spanish wind energy company working on five projects in the U.S., including the Penascal Wind Farm in Texas and Locust Ridge II in Pennsylvania. Iberdrola is probably popping the champagne right about now in celebration of its newly-minted $295 million, but the grant's impact goes beyond just the Spanish energy giant.

Wind energy companies have been in dire straits ever since banks started to fail last fall. Investment money dried up, and as a result turbine manufacturers and developers had to hold back on potential projects. But now that the government has injected significant amounts of cash into clean energy projects, investors have an incentive to provide capital. Such a big incentive, in fact, that Morgan Stanley and Citigroup are each underwriting wind farms worth over $100 million.

The government's willingness to give the big bucks to wind power has given investors newfound confidence, and they are now willing to pony up for projects. At the same time, the government cash has convinced foreign companies like Iberdrola to stay the course. The company plans to invest $6 billion in the U.S. wind energy sector in the next four years.

There are still hurdles up ahead for U.S. wind power—it's not always easy to find consumers for the wind energy produced, which is on average more expensive than fossil fuels. But the government grants have at the very least kept the industry from shriveling up altogether.

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Subsidies generally aren't a good idea as they can dry up as fast as they appear. See today's WSJ artricle http://online.wsj.com/article/.... (Though petroleum is obviously heavily subsidized both directly and indirectly...few think of our massive naval fleet, government "aid" to Saudi dictators, government-funded highways & roads, etc., as "subsidies," but they clearly are. I'm sure there are similar situations for coal, though none come to mind off hand).